Retail sales in U.S. increase at slower pace as taxes take bite

Retail sales in the U.S. rose at a slower pace in January as an increase in payroll taxes took a bite out of consumers’ paychecks.

The 0.1% climb followed an unrevised 0.5% increase in December, Commerce Department figures showed today in Washington. The advance matched the median forecast of 80 economists surveyed by Bloomberg.

A two percentage-point increase last month in the levy that funds Social Security reduced take-home pay, countering some of the gains in household disposable income from an improving job market. At the same time, more employment, combined with higher property values and stock prices, supports consumers and adds traction to purchases that make up about 70% of the economy, a boon for retailers such as Gap Inc. and Target Corp.

“The payroll tax increase is having some impact on spending here,” said Thomas Simons, an economist with Jefferies Group Inc. in New York, whose firm after today’s report is the second-best forecaster of retail sales for the past two years, according to data compiled by Bloomberg. “It looks like maybe momentum is not necessarily carrying forward into the first quarter. A lot of the data at this point is going to be kind of a mixed bag and difficult to interpret.”

Prices of goods imported into the U.S. rose in January for the first time in three months, led by more expensive fuel and building materials, a report from the Labor Department also showed today. The 0.6% gain in the import-price index followed a revised 0.5% decline in December that was larger than initially estimated.

Shares Climb

Stock-index futures held earlier gains after the reports as President Barack Obama proposed spending on infrastructure and environmental projects in his State of the Union address. The contract on the Standard & Poor’s 500 Index maturing in March rose 0.2% to 1,519.2 at 9:09 a.m. in New York.

Estimates for January retail sales in the Bloomberg survey ranged from a drop of 0.7% to a gain of 0.6%.

Six of 13 major categories showed gains last month, led by a 1.1% jump at general merchandise stores that was the biggest gain since April 2011. Demand at sporting goods merchants and non-store retailers, which include internet outlets, also advanced.

Demand at auto dealers fell 0.1% in January from the prior month, in line with industry data issued earlier this month. Cars and light trucks sold at a 15.2 million annual rate in January after 15.3 million in December, according to data from Ward’s Automotive Group. Including November’s 15.5 million rate, auto sales over the past three months have been the strongest in five years.